Change: how to invest a cyclical industry Exclusion has been a cyclical industry, cyclical industry complexity and unpredictable nature also highly challenging, but most of China&#39;s A share of stock is a cyclical industry, it is still very interested in the cyclical industry as one of issues, hoping to find as close as possible to determine uncertainty in the part. Buffett does not rule out future investment in oil and encounter such a high certainty of investment opportunities to participate. Cyclical investment companies must first understand their high risk and have adequate mental preparation. 2006 bull market has been spectacular and far exceeded the imagination of the great bear market to the crazy speculative and cyclical industry falling waterfall vividly once again in the interpretation. This so-called blue chip including Vanke most cyclical businesses, including the biggest decline in more than 80 percent, Jiangxi Copper, etc. about ten more than 90%. Do not think this is the end, the future prices fell more than 95% of the stock I do not feel surprised. Fell 95% from 90% is a ceiling, not a very large decline in security. Cyclical industry boom of the amount of peak prices go up, the industry downturn and it is contrary. Cyclical factors affecting industry profitability include product prices, demand, capital expenditure and capacity utilization dislocation caused by the additional financial costs. Which is the dominant factor in the first two factors. The cyclical fluctuations of the two corporate earnings volatility. Part of the cyclical industry, price and demand volatility great, such as non-ferrous metals, shipping, prone to extreme profitability. Some prices stable or less volatile, changes in demand for larger, less volatile earnings, such as banks, securities. Most cyclical business like in the industry boom of the peak of blind expansion, once the industry is the formation of a large decline in excess capacity, the excess capacity not only can not produce benefits, depreciation, amortization, debt, maintenance also generate a lot of costs, erosion of business profits, so the higher the fixed cost industry, the output changes caused by the higher volatility of profits. Those in the industry boom of the appropriate control before the peak expansion of size, industry boom of the late low to proactively expand the business aggressively is likely to be good investment targets. ? I put a cyclical industry into consumer cyclical industries and industrial cyclical sectors. First, consumer cyclical sector Consumer cyclical industries including real estate, banking, securities, insurance, automotive, aviation, consumer cyclical sectors both a cyclical industry and consumer industry characteristics. Most of their consumer end users (including corporate banking), although low brand loyalty, but still has a certain brand. Although demand fluctuations but the overall upward, and basically just started in China&#39;s industry, a huge market prospects. In addition to automotive, aviation, the assets are less enterprise, industry, economy low degree of flexibility when a larger scale. ?1, Bank Banks are relatively stable prices, demand fluctuations are relatively small, accounting for a large retail bank which is more cyclical weakening. Profitability of the banking industry is relatively stable in several industries, but the Chinese banking industry will face the future and the possible arrival of spreads to narrow the interest rate market, as well as real estate and financial turmoil has resulted in a large number of business failures caused by the outbreak of bad debts possibilities. 2, real estate Although real estate prices and demand fluctuations, but fluctuations in speed and magnitude smaller than the industrial sector, and product diversity, the difference of the Te Xing, certain areas of the products have the resource monopoly characteristics. Leading enterprises have better ability to resist risks, market downturns can bring low-cost opportunities for mergers and acquisitions, industry demand for higher rigidity and certainty. 3, the Securities The price of the securities industry with relatively stable, fluctuations in demand is very high. Comparison of the securities industry, investors are in a special industry, periodic change more obvious, such as through the valuation and volume indicators are relatively easy to determine the turning point of the industry. 4, Insurance Actually not a cyclical industry, the insurance, but the existence of investment income, will show strong cyclical phase of China&#39;s insurance industry growth to the main volatile weakening. If it were not encountered major bear market or bull market, the cyclical insurance industry is not obvious. It should be noted that in the fully competitive market environment in the insurance industry is vulnerable to an industry price war, in order to obtain a temporary market share and leadership position, may appear irrational policy design, policy most of the Du endure for some years, dozens of , the bad results may appear only after a long time, which is difficult to assess the risk of investors. Life and peace at this stage is still in the status of oligopoly competition, with the relaxation of control policies, many foreign insurance continued into China, foreign insurance market expanding, market competition will become fierce. 5, car ?Rapid model updating of the automotive industry, technology updates faster, are important assets of enterprises, industry competition, sensitive to oil prices, many factors affect the profit, profit is difficult to judge. And even if the boom of the peak of the profitability of different enterprises vary and may not enhance the rate very high. Might be bad is bad, good may not be a good trade. 6, air Airline industry competitive, vicious price competition often (two to three fold price everywhere), high fixed costs, large capital expenditure, operating costs as oil prices and exchange rates fluctuated wildly, the aviation industry to the profitability of the industry characteristics low. Real estate, banking, securities, insurance, industry and daily life of the four closely related, the investors can trade more easily and intuitively feel the cold, and the factors affecting profitability is relatively simple, relatively more predictable (and banks and macro- the close of the economy increased the difficulty of judging), the investment is a cyclical industry a better choice. Characteristics of automotive and aviation industries decided they are not a good investment targets. ? Second, industrial class cyclical industry Cyclical industries, including non-ferrous metals industry category, steel, chemicals, cement, electricity, coal, petrochemical, engineering machinery, shipping, equipment manufacturing. The industry is highly related with macroeconomic, macro-economic complex, the basic unpredictable (often many famous economists forecast is wrong). And great price volatility decreased rapidly (such as the recent plunge in just two or three months 90% of the shipping price, non-ferrous metals are large decrease), the rapid changes in demand and a long cycle, and sometimes there is no reaction time investors. Significantly affected by raw material cost of the product, basically re-assets of enterprise, the input-output cycle is long, the peak of the industry boom of the large capital expenditure of the large depreciation and amortization, profits are extremely sensitive to changes in yield, when the industry downturn little flexibility to adjust the scale, many factors affect the profitability of the unpredictable, it showed a high degree of earnings volatility, the difficulty of judging cycle turning points and higher. Other petrochemicals, power, oil and other industries subject to government price controls there is the possibility of earnings fell unexpectedly. Fluctuations in industrial sector has also brought great opportunities for high returns, but such opportunities are not the average investor can easily grasp. In particular, some long-cycle industries, such as non-ferrous metal, the rhythm may not be the wrong step years but 10 years to mitigate this problem. Yet it is colored, oil, coal, gold, iron and steel resources of the upstream industry of such products a single, homogeneous and strong, commodity futures market or commodity price index, price trends and the industry boom of a visually clear guidance (Shipping has a similar index), according to the product price range is easier to judge the industry turning point. Prices usually run a certain range, although over time interval will change, but as long as sufficiently long period of data collection, it can be drawn about the law. The profits of the upstream industry more volatile, higher risk. , The downstream industry complex product categories, different historical periods and various sub-sectors of the different segments, so that more difficult to judge the industry cycle. Due to the differences, there is no price index as a simple and intuitive judgments based on macroeconomic and more dependent on the specific circumstances of each sub-sector. ?Cyclical industry, often along the chain cycle of the order to turn a certain place, usually the recovery began in auto, real estate, infrastructure, machinery, equipment manufacturing and other downstream industries, and then transfer to the fiber, non-metallic mineral products, non-ferrous metal smelting rolling, rolling of ferrous metals smelting and other mid-stream processing and manufacturing, and finally the upper reaches of the nonferrous metals, petroleum, coal, petrochemical and other industries. Starting from the downstream industry is a recession, followed by transfer to the midstream and upstream sectors. Historical background is not a simple repetition of the cycle, run the law is not static and can not simply apply the historical experience of the cycle turning points of the judge, but according to the experience of a concrete analysis of specific situations. I put a lower book value (less than 2, less than 1 strong cyclical) and high price-earnings ratio as a necessary condition for buying cyclical businesses, because that is the actual valuation of lower corporate and industry in the doldrums time. For the industry price index, price indices can be combined book value and profits, largely determine the operational phase of the corresponding industry. But even if the index is running at low levels, is not you can buy right away, still need a longer observation time, because the indicators may be more significant to break the historical range. ?Here are some investment principles and techniques cyclical industry: 1, cyclical industry valuation is almost impossible task, trying to determine the valuation of the cyclical safety margin is often futile enterprise. 2, standing on a long-term perspective, often the price-earnings ratio but the higher the lower the actual valuation, instead of the high price-earnings ratio may underestimate the value of the region. 3, according to industry boom of the sale of time judge is more reliable than the valuation basis, the industry boom of the peak is the most dangerous time, after the 2012 peak is definitely not a good buying opportunity. 4, a more useful reference for periodic valuation is the book value rather than price-earnings ratio. 5, can not buy shares fall as the basis for a cyclical decline in the industry are often far exceeds the imagination. 6, cyclical industry needs high investment security and certainty, especially strong cyclical industry. Profitability of a significant slowdown or even negative growth is not a good selling points, the majority of business loss or failure will be safer. Now most of the cyclical industry not for the latter scenario. 7, no wealth of industry knowledge and deep understanding of the industry before, do not touch. 8, do not overestimate their ability to ring, do not assume some indicators as to buy based on own. 9, cyclical company&#39;s share price is often recurrent, or decline to engulf most of the gain, phase hold is the best strategy, not super-long-term holding. 10, very different characteristics of different industries, can not apply the experience of other industries as the basis to judge. 11, need to select the industry leading enterprises, SMEs are likely to rebound in the industry again before the fall, even if there is no viable competitive advantage. 12, the future of certain industries might international industrial shift. Shipping, steel history experienced several international transfer, forward other industries may also happen, which is devastating the industry factors. 13, need strategic investment in a cyclical industry perspective, the perspective from the industry cycle options trading opportunity, and not care about short-term investment opportunities. 14, or look after other people are often very simple, but really predict accurately is extremely difficult. ? ?
Pages to are hidden for
"Change： how to invest a cyclical industry"Please download to view full document